April 19, 2017

Grain Railroad in Northern Brazil Could be Functioning by 2025

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Farmers in northern Mato Grosso have been pushing for infrastructure improvements that would allow them to ship their grain production north to ports on the Amazon River instead to distant ports in southern Brazil. Two projects that would accomplish their goal are currently in the works. The paving of highway BR-163 from Mato Grosso north to the Amazon River is expected to be completed sometime in 2018 and final preparations are being made to license the construction of a railroad that would parallel the highway all the way to the Amazon River.

While the highway may be completed within a year or so, they may have to wait a while longer for the railroad, which could be completed by 2025 in a best case scenario. The new railroad, which is being called the "Grain Railroad", is scheduled for bidding later this year.

The railroad is scheduled to be a public/private partnership where the government will own the land and private companies could win the right to build and/or operate the railroad. Major international grain companies including ADM, Bunge, Cargill, Louis Dreyfus, and AMaggie have expressed interest in forming a consortium to bid on the project. Chinese companies have also expressed interest in the project. The winning bidder or bidders would have the right to operate the railroad for a period of 65 years.

The Grain Railroad would initially go from Sinop in northern Mato Grosso to the port of Miritituba on the Tapajos River just before it flows into the Amazon River at the city of Santarem. At the Port of Miritituba, numerous barging operations are being built to transport grain to ports near the mouth of the Amazon River. Eventually, the railroad is scheduled to be extended southward to the city of Lucas do Rio Verde in central Mato Grosso.

Upon completion, the railroad would extend 1,140 kilometers with a total cost estimated at R$ 12.6 billion. According to Edeon Vaz from Pro-Logistics, it would probably take two years after the bidding process is completed to obtain all the licenses necessary to begin construction. In a best case scenario, construction might begin in 2020. It is estimated that it would take five years to complete construction at a rate of 200 kilometers per year, putting the completion date in 2025.

Moving grain north to ports on the Amazon River instead of to distant ports in southern Brazil is expected to save approximately 40% on transportation costs.